See, that is a big leap.
Digital books aren't taking over 100% of the market.
So far, it's 50% in most genres with some expectations of 60% in the near future.
So there will be likely always be a market for pbooks.

The problem is how *big* a market and for what kinds of books? And that the most profitable parts of the market are what's moving to digital and what remains may not be enough to support B&N in the "style they've become accustomed to", as they say in divorce court.

The bulk of the profits for the big stores has traditionally come from the high volume bestsellers and genre fiction. Once the general retailers started undercutting everybody that left genre sales as the source of volume. That is where ebooks hurt pbook retailing: in sucking out the volume and reducing the revenue per square foot of the big stores.

With lower volumes of books, B&N tried using floorspace for other, non-book products. So far, that isn't working. And it seems to be annoying at least some customers.

The next logical step is to reduce floorspace altogether, to match the expected volume of pbook sales. But that is easier said than done because of the leases. The exact same problem that sunk Borders.

What they need to do is close as many big stores as possible while at the same time opening much smaller stores.

Basically, over the last ten years B&N zigged when they should've zagged; they shut down the B.Dalton mall stores when they should have been modernizing and expanding the chain instead of the big warehouses, which they should have been shutting down.

Yes, less than 20 stores lost money and their EBITDA was $312 million.

Their last reported quarter was 2013Q1 with an overall earnings-before-nasty-stuff of $4 million.
And it is a meaningless figure anyway. They have to pay tax, they can't just ignore it and hope it goes away. That was 22 million in 2013Q1.
Even taking all the nasty bits out, the figures are still pretty poor:

Giving 3,833K, or 0.26% profit margin, even ignoring ITDA.
They are paddling as hard as they can just to stay still, even if you strip out everything else. Adding in everything else, they lost just shy of $41 million for the quarter.
To put it another way, cost of sales was 71.5% of revenue. Overhead was 28.2%. That adds up to 99.7%. EBITDA is basically rounding error at this point.

That's not necessarily true. It does nothing to raise revenue, but revenue and prfoit aren't the same thing. If they close stores that are losing money, it can, indeed, raise profits.

Nobody predicted Home Depot's death spiral when they were closing unprofitable stores a few years ago. Nobody predicted Walmart's death spiral when they were closing unprofitable stores a few years ago.

It could be the salvation of the company, or it could be another in a long series of bad decisions. From the outside, the only way we can tell is to watch what happens.

Neither of those companies you listed are "dying" industries, though. On top of that, none of them were subject to so many years of ineffective management. Barnes and Noble has been in trouble for a very, very long time, and it's never gotten better. People talk about a "death spiral" because it's just the way, the trend, that has been happening. I think the store closures are overstated, of course. Companies close stores all the time, and I think they're actually opening 15 as well.

Neither of those companies you listed are "dying" industries, though. On top of that, none of them were subject to so many years of ineffective management. Barnes and Noble has been in trouble for a very, very long time, and it's never gotten better. People talk about a "death spiral" because it's just the way, the trend, that has been happening. I think the store closures are overstated, of course. Companies close stores all the time, and I think they're actually opening 15 as well.

The point being, the press stories are not enough to determine the health of the company. One way or the other.